Sun Art Retail Group Limited - TodayIR.com

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29 SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and
other factors, including expectations of future events that are believed to be reasonable under the
circumstances.
The selection of critical accounting policies, the judgements and other uncertainties affecting
application of those policies and the sensitivity of reported results to changes in conditions and
assumptions are factors to be considered when reviewing the financial statements. The principal
accounting policies are set forth in note 1. The Group believes the following critical accounting
policies involve the most significant judgements and estimates used in the preparation of the
financial statements.
(a)
Depreciation
Investment properties and other property, plant and equipment are depreciated on a straightline
basis over their estimated useful lives, after taking into account their estimated residual
value. The Group reviews annually the useful life of an asset and its residual value, if any, in
order to determine the amount of depreciation expense to be recorded during any reporting
period. The useful lives are based on the Group’s historical experience with similar assets
and taking into account anticipated technology changes.
(b)
Provision for inventories
The Group reviews the carrying amounts of the inventories at each reporting period end date
to determine whether the inventories are carried at the lower of cost and net realisable value.
Management estimates the net realisable value based on the current market situation and
historical experience on similar inventories. Any change in the assumptions would increase
or decrease the amount of inventories write-down or the related reversals of write-downs
and affect the Group’s net asset value.
(c)
Impairment losses on trade and other receivables
Impairment losses on trade and other receivables are assessed and provided based
on management’s regular review of ageing analysis and evaluation of collectability. Any
increase or decrease in the impairment losses for bad and doubtful debts would affect the
consolidated statement of comprehensive income in future years.
(d)
Income tax
Determining income tax provisions involves judgement on the future tax treatment of certain
transactions. The Group carefully evaluates tax implications of transactions and tax provisions
are set up accordingly. The tax treatment of such transactions is reconsidered periodically
to take into account all changes in tax legislation.
108
Sun Art Retail Group Limited
Annual Report 2012